alstry (36.50)

Banks Squeezing FloridaBuilder's WCI?

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The ratio of net debt to net capitalization increased to 83.3% compared with 65.5% at March 31, 2007 and increased from 80.5% at December 31, 2007. As of March 31, 2008, excluding $53.4 million in letters of credit, we had approximately $192.4 million available commitments under our senior secured credit facility which was further limited by borrowing base availability which was an estimated $115.0 million at March 31, 2008, plus $48.5 million of cash and cash equivalents. Due to our strategy of selling unsold completed inventory, the impact of impairments to our inventory, and the impact of significant reductions in inventory additions, our borrowing capacity may be limited by the availability determined through our borrowing base as calculated under the loan agreement, which is currently less than the available loan commitments. In addition, our lenders are currently obtaining appraisals on our properties in the borrowing base, and should the appraisals reflect values less than expected, our borrowing base capacity would be further limited, potentially resulting in the loss of additional borrowing capacity and/or mandatory prepayment obligations.

Why would the banks be getting appraisals if they weren't looking for an excuse to call the loan?

When it reported a first-quarter loss early Wednesday, the ailing condo builder revealed an agreement with the state's Department of Community Affairs requiring it to give rescission and return some deposits if the company isn't ready to close title on condos at the Watermark in North Bergen by May 26.

As of Tuesday, WCI lacked certificates of occupancy for 43 of the 126 units in backlog, putting about $10 million in deposits on the line. The contracted values, it said, are about $50 million. If it is ready to close by May 26, buyers can still cancel, but without returned deposits.

New Jersey officials didn't return a call. WCI declined to comment.

That's not good news for the highly levered company - chaired by billionaire Carl Icahn - that many say is struggling to stay afloat. The stock has plummeted about 85% in the last year and there is substantial doubt about its ability to "continue as a going concern."

"They don't have any bank availability. The banks have shut them off," said Vicki Bryan, a senior high-yield analyst with Gimme Credit. "This WCI thing is a train wreck."

Added Morningstar's Eric Landry: "It's just too difficult to determine whether the company has adequate liquidity to withstand the current storm without causing shareholders irreparable harm."